MN DEED Now Accepting Applicants for Minnesota Angel Tax Credit Program

Summer is in full swing and as you prepare to head to the cabin for the fourth of July, now is a good time to review exciting news for Minnesota entrepreneurs! After a several year hiatus, as of July 1, 2019, the Minnesota Department of Employment and Economic Development (DEED) once again accepts applications from businesses, investors, and funds to participate in the Minnesota Angel Tax Credit program. If you are an avid follower of this blog (and you should be), you probably are already aware of the historical popularity of the Minnesota Angel Tax Credit and some of its limitations. If you are not a frequent reader or are new to the entrepreneurial scene in Minnesota, below are some highlights of the 2019 Angel Tax Credit program.

• Minnesota’s Angel Tax Credit provides a 25% credit to investors, or investment funds, that make equity investments in early stage companies (with a particular focus on high technology, new technology, or new proprietary products, processes, or services in select fields). 
• The maximum credit is $125,000 per person, per year ($250,000 if filing jointly) and the credit is both refundable and available to residents of other states and foreign countries. 
• For 2019, the Minnesota legislature allocated $10 million of tax credits for eligible investments. Until September 30, 2019, $5 million of that $10 million is reserved for businesses owned by women or minorities, or for businesses located outside of the seven county metro area. Beginning on September 30, 2019, any portion of that $5 million that has not been allocated will be made available for all other eligible investments.
• If you are planning to use the Minnesota Angel Tax Credit for an investment in 2019, you should plan on becoming qualified as soon as possible. Many companies are submitting applications now, and some have even delayed financings that would have been otherwise completed at this point in the year.

As a reminder, the process requires that the company be certified as a qualified business and that the investor also be certified as a qualified angel. Both of these steps require filings with DEED. Once the company and investor are both certified, they must jointly submit a credit allocation application. 

SELF-REPORTING OF UNREGISTERED INITIAL COIN OFFERINGS: PERHAPS A FRAMEWORK FOR AVOIDING HEFTY CIVIL PENALTIES

Keeping with the theme of my prior post covering recent oversight and enforcement action by the Securities and Exchange Commission (SEC) of the cryptocurrency industry/exchanges, Gladius Network (an issuer of unregistered cryptocurrency tokens) recently reached a settlement with the SEC which avoided civil penalties entirely.

Gladius, a Washington D.C. firm dedicated to using the Ethereum Blockchain as a means of mitigating Distributed Denial of Serve attacks, raised over $12 million USD in an initial coin offering (ICO) in 2017 – the peak of the cryptocurrency investor craze. 

As SEC enforcement activity increased over the last several years, and the SEC maintained that most ICOs qualified as the sale of unregistered securities, Gladius decided to proceed with caution and self-reported its unregistered ICO to the SEC during the summer of 2018.  Gladius cooperated with the SEC’s investigation and agreed to take certain remedial actions, including registering its tokens as a security and repaying investors that requested their investments back.

Most significantly, however, is the SEC’s determination not to levy any civil penalties against Gladius. The SEC explained that “the SEC did not impose a penalty because the company [Gladius] self-reported the conduct, agreed to compensate investors and will register the tokens as a class of securities.” Robert Cohen, Chief of the SEC’s Cyber Unit, further commented that the case “shows the benefit of self-report and taking proactive steps to remediate unregistered offerings.”

The Gladius settlement follows similar enforcement actions initiated by the SEC in November 2018 against companies that conducted unregistered ICOs. In those instances, the companies did not self-report and were penalized by the SEC, sometimes to the tune of $250,000.

If nothing else, the Gladius case sends a clear and deliberate message that self-reporting to the SEC can result in meaningful cooperation credit – in particular the avoidance of hefty civil penalties. 

If you or your company are interested in learning more about the SEC’s guidance regarding cryptocurrency or ICOs and the recent regulatory activity, or have questions about how to make sure you are in compliance with securities law, the GPM team is here to help.

Recent SEC Activity Puts the Cryptocurrency Industry on Notice

For those who have not been following the U.S. Securities and Exchange Commission’s (SEC) oversight of the cryptocurrency industry/exchanges, the SEC recently settled its first-ever enforcement action against an unregistered cryptocurrency exchange.

Earlier this year, the SEC accused the cryptocurrency exchange EtherDelta and its management team of violating federal securities laws by illegally allowing users to trade tokens (a form of cryptocurrency) that the SEC considers securities under federal law, making it an unregistered securities exchange. Without admitting or denying any of the SEC’s allegations, EtherDelta agreed to pay a $75,000 fine and $313,000 in disgorgement and interest. 

This enforcement action comes on the heels of the SEC’s issuance of The DAO Report—a comprehensive investigation by the SEC of The DAO, a now defunct unincorporated organization established with the objective of operating as a for-profit entity that would create and hold assets through the sale of tokens. Among other findings and a lengthy discussion of the fascinating downfall of The DAO, The DAO Report, as well as the SEC’s March 2018 guidance on cryptocurrency, indicated that nonexempt cryptocurrency exchanges must be registered with the SEC and that online platforms that allow the trading of digital cryptocurrency assets could, in fact, be trading securities. 

Timing Matters in the Entrepreneurial Process

For those who did not catch Richard Bennett’s recent insightful blog post, he provided a link to a great article aimed at helping entrepreneurs navigate the “do’s and don’ts” of starting a business. I thought about his post when I came across the article, “When Should Entrepreneurs Write Their Business Plans?” during my weekend reading (yes, I’m an entrepreneurial geek).

Using a 2016 survey of over 1,000 entrepreneurs, researchers Francis J. Greene and Christian Hopp studied the relationship between the timing of certain business tasks and the likelihood of success. Their study found that the probability of launching a successful business not only hinges on whether an entrepreneur undertakes (or does not undertake) certain activities, but at what point in the process such activities take place. 

THANKSGIVING BY THE NUMBERS

Who’s hungry? I know I‘m not . . . . After two family dinners, approximately six food comas (officially known as “postprandial sleep,” according to a study of fruit flies who overate), countless hours of  football, and a fridge full of leftovers that seems like it will keep me fed all the way to Christmas, another Thanksgiving holiday is in the books. After a long weekend traditionally filled with family, friends, revelry, giving thanks, eating, eating and more eating, we wouldn’t typically take the time to consider just how massive the Thanksgiving operation in the United States really is. So, as I waddled to work a couple of days ago, on a warmer than usual Monday morning, I decided to do just that. 

IT’S FANTASY FOOTBALL SEASON! - A giant business and the enemy of employee productivity

As we set our rear view mirrors on Labor Day, the pastimes of summer (and the abundance of sunshine) are receding day by day, hour by hour.  For many, this means an end to evening rounds of golf, weekends spent enjoying the lakes; and, for those—such as my grandmother—more serious about the fashion implications of the holiday weekend, the seasonal retirement of our white garments.

But with every end comes a new beginning, and, to millions of sports enthusiasts, the beginning of fall marks the advent of one of the most exciting times of the year –fantasy football season.  

Fantasy football is a game where individual participants or “owners” assemble an imaginary team of real professional football players into a “fantasy team”.  Fantasy Teams compete each week based on the statistical performance of the real players in actual games. While there are many fantasy football formats, most game types award points when players on a fantasy team catch or pass the football, run for yardage, score touchdowns, kick field goals, make interceptions . . . the list goes on and on. The objective is to accumulate more points than your competitor in any given week. A fantasy football season typically culminates in a playoff where the best teams go head to head to attain the glory of league champion (and in many cases a cash prize).

GOLF SEASON IS HERE! BUT WHAT ABOUT THE GOLFERS?

When it comes to golf, I am a purist. Perhaps it is because I grew up playing “neighborhood golf” (a topic for another post), but given my druthers I’d prefer the game remain unchanged. I was a member of my high-school’s varsity team, and continue to use golf as my main form of summer leisure.

Golf requires formality and nuance, mental toughness, finesse, competitiveness, and a willingness to endure the duration of a round that can (at times) feel like a marathon. Hitting a pure shot every now and then helps too, but in my opinion the opportunity to enjoy the outdoors and tackle the challenge of the next unique hole makes up for an entire day of bad shots.

In Minnesota, I am not alone in my admiration of the game. In fact, Minnesota has more golfers per capita than any other state – pretty incredible if you consider that our golf season is only seven months long. . . in a good year.